Expedia climbs to 4th-quarter profit from loss as more travelers book trips, starts dividend

Rebound in bookings lifts Expedia to 4Q profit

BELLEVUE, Wash. — Online travel company Expedia Inc. said Thursday that higher bookings lifted it to a fourth-quarter profit from a year-ago loss and declared its first-ever quarterly dividend. The news is another encouraging sign for the travel sector, which has struggled during the economic downturn as business and leisure travelers tightened their spending.

Earlier Thursday hotelier Marriott International Inc. also reported a return to fourth-quarter profit as business travel improved and budget-conscious leisure travelers took advantage of promotions at its namesake and Ritz-Carlton brands. And Wednesday, Wyndham Worldwide Corp., which runs Ramada, Days Inn and Super 8 hotels, posted better-than-expected results on higher occupancy levels. Both hotel operators conceded, however, that room rates remain weak.

Expedia President and CEO Dara Khosrowshahi said more travelers are booking trips further in advance, though the window has yet to return to 2008 levels. Corporate travel appears to be improving somewhat, he said, pointing toward strength in the company’s business travel group Egencia.

“I wouldn’t say that things are super, but it is a heck of a lot better than last year, and I think everyone is feeling more stable and it is back to kind of managing the business,” Khosrowshahi said on a conference call with analysts.

Expedia said domestic bookings climbed 19 percent in the quarter, and international booking surged 38 percent. Though the earnings results surpassed Wall Street’s expectations, they didn’t cheer investors. Expedia shares dropped $1.11, or 5 percent, to $21.13 in afternoon trading.

Michael Millman of Millman Research Associates said investors may be reacting to their first take on Expedia’s revenue margin — or how much revenue Expedia took in as a percentage of bookings. That figure shrank 1.6 percentage points in the quarter.

The market also may be a little disappointed that the earnings didn’t beat expectations by a wider margin, he added.

Expedia earned $102.2 million, or 35 cents per share, for the period ended Dec. 31. That compares with a loss of $2.76 billion, or $9.62 per share, a year earlier. Excluding restructuring charges and other one-time items, profit of 30 cents per share beat analysts’ average estimate by a penny.

Revenue improved to $697.5 million from $620.8 billion on strength overseas as gross bookings grew to $5.05 billion from $4.02 billion. That also topped the $689.7 million expected by analysts polled by Thomson Reuters.

For the full year, Expedia reported a profit of $299.5 million, or $1.03 per share, compared with a loss of $2.52 billion, or $8.80 per share, in 2008. Annual revenue rose to $21.81 billion from $21.27 billion.

Chief Financial Officer Michael Adler said Expedia plans to ramp up marketing spending in 2010 after reducing those costs last year to help contend with recessionary pressures.

Expedia, based in Bellevue, Wash., initiated a quarterly dividend of 7 cents. The company will pay the dividend on March 31 to shareholders of record March 11. Based on current shares outstanding, the company estimates the payout will amount to $20 million.